Tax software for federal, state, and local taxes in the US has evolved significantly over the past several years, becoming more reliable and more accessible. Now available in forms that you can access directly for use on the Internet, there is a tax program to meet nearly everyone's needs, whether you are a wage earner with no dependents or a business owner who operates in multiple states.

Steps

Method1

Choosing Software for Personal Income Taxes

1

Consider your needs. How detailed do you need a tax software to be? How much are you willing to pay? The differences between all the types of software for simple returns are minimal. For simple returns, the major differences are ease of use, simplicity of the interface, and price. Decide which is most important for you.

The difference in capability for simple returns really is minimal. Multiple sources show the major programs—TurboTax, H&R Block, TaxAct, and FreeTaxUSA--all produced the same returns for state and federal taxes for a person with one job, no dependents, and a savings account as their chief asset.[1][2][3]

2

Measure your skills. The flip-side of determining your needs is measuring your skills. If you are a more advanced computer user, you might be more comfortable using software that’s less intuitive.

For example, TaxAct’s software is among the cheapest options, but is widely regarded as less intuitive than some of the others, like TurboTax.[4]

If you have a background in bookkeeping, business, or law, you might be more aware of deductions and tax credits, and better equipped to use software that allows you to skip around.

3

Consider the specifications of the program. A certain set of features will be used by almost everyone. Other features have more niche uses. If you’ve taken a measure of your skills and needs, you’ll have a better idea of which feature you need.

Nearly everyone will want software that allows you to file federal and state returns, uploads the information from your 1099 forms and W-2s, allows for easy navigation, and has a thorough help and support section.

Features which are less widely used include: the ability to file multiple returns, ability to import data from other financial programs (such as QuickBooks), and allowing adjustments for inheritances, divorces, or the birth of a child.

4

Weigh your needs and skills against the programs’ capabilities. A lot of people are going to want to find one tax software program and stick with it. Since virtually all of the programs keep records for all the years you use that program, it can be helpful to have the records all in one place.

Although not everyone will need it, two of the big storefront chains, H&R Block and Jackson Hewitt, both offer support from tax professionals in addition to technical support, which all of the major programs offer.[5]

Multiple sources rate TurboTax highly. They cite the software’s blend of advanced options, price, and ease of use. TurboTax uses an interview style format that ensures that the user hasn’t missed any deductions or obligations. In addition, TurboTax ease of use minimized liability and maximized returns for complex taxes for multiple reviewers.[6][7]

5

Compare costs across programs. For most users drawing wages from an employer, the difference in price is going to be negligible—probably less than $30. In addition, many of the programs allow people who make less than $62,000 to file federal taxes completely free.

The difference in price really comes into play for the self-employed, like freelancers, contractors, and sole proprietors. Many of those users will need to use a software program that is tailored for those workers.

FreeTaxUSA allows the self employed to file federal taxes for free and state taxes for only $12.95, but it is not widely reviewed.[8]

If you are younger than twenty two, consider FreeTax USA. It’s completely free for state and federal filings.

Be sure to look out for discounts, including advertised sales and gift card bonuses.

Method2

Choosing Tax Software for Your Small Business

1

Decide what you are willing to pay. Price generally isn’t the deciding factor for choosing software for filing personal income taxes, because most customers won’t pay more than $50 anyway. Tax software for businesses is considerably more expensive. The price for some brands, like TurboTax for Small Businesses, can easily top $200.[9]

2

Consider the ease of use. Since business taxes are more complicated than personal income taxes, ease of use can be a more important factor in choosing business tax software. [10]

Due to their complexity, a lot of users will have a greater desire to be walked through filing their business taxes than personal income taxes, so an interview format such as the one found in TurboTax and H&R Block can be very helpful.[11]

There is a much wider variation in maximizing returns and minimizing liability when compared to personal income tax software. This seems to stem from ease and difficulty of use, rather than some programs having larger databases or more capabilities than others.

For example, some reviewers rated TaxAct’s business software as downright difficult to use, compared to the personal income tax version being simply un-intuitive.[12]

Help and support goes a long way toward making a program easier to use. Two of the big storefront chains, H&R Block and Jackson Hewitt, both offer support from tax professionals in addition to technical support, which all of the major programs offer.[13]

3

Make sure the software can import financial information from other programs. While a lot of people don’t even use software like QuickBooks for personal finances, almost all business owners will use financial software for their business. So when choosing tax software for your business, make sure it has this capability.[14]

Some programs will even import past information from other brands of tax programs. If you’re making a switch, look for this capability as well.

4

Look for software that supports multiple returns. Many business owners might divide what appears to be one business into several companies, which would require filing more than one state and federal return.[15][16][17]

Additionally, a lot of businesses derive income from multiple sources and do business in multiple states. Using a software program that allows the filing of multiple returns for little or no extra money would be advantageous for them as well.

5

Think about hiring an accountant. For some people, the $200 price tag and the aggravation of doing their own business taxes won't be worth it. If gathering financial information and choosing software seems like a task that's too daunting, give serious thought to choosing a competent, experienced professional to complete your taxes for you.